bail out

Buffett Thanks "Uncle Sam" for Big Bailout Payday

Michael Collins

"Mr. Buffett. You are no different than Goldman Sachs and the other exploiters funded by the hard work of everyone other than those who reap the benefits of that work."

The people's oligarch Warren Buffett just wrote a thank you letter to "Uncle Sam" published in the New York Times. It is the height of cynicism. (Image)

Buffett has a carefully crafted public image as a brilliant but people-friendly master of investments. We hear about his regular table at an Omaha diner where he conducts business (just plain Warren) and we see his occasional public stands for reasonable policies like the inheritance tax.

He claims that "Uncle Sam", the government, saved us from a financial catastrophe that would have swallowed up his company. He then endorses the notion that the housing bubble was based on "mass delusion" - meaning it was our fault. But he forgets to mention that he took advantage of the 2008 crisis to purchase a $5 billion interest in Goldman Sachs. And he forgets whose money "Uncle Sam" stole from the Treasury to save him and the rest of his cronies. What a hypocrite.

What's a capitalist to do?

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AIG's Joe Cassano - An American Tragedy

By Numerian

What’s a capitalist to do when he loses $500 billion and almost single-handedly destroys the global economy? In Japan you would bow deeply in public and express the deepest possible remorse and shame, that is if you already had not committed seppuku. In America, where the Ayn Rand ethos of objectivism reigns supreme, you weasel your way out of any explanation or regret, while riding off in the sunset with your undeserved fortune.

Joe Cassano, former CEO of AIG Financial Products, could have chosen the Ronald Reagan Alzheimers defense: “I have forgotten everything that happened.” That was the route taken by AIG Chief Risk Officer Robert Lewis, when he along with Cassano appeared yesterday before the Financial Crisis Inquiry Commission. Lewis, unlike Reagan, had to act like he actually had Alzheimers to make this defense plausible.

Cassano could have used the “I was too dumb to know what I was doing” defense, which would have at least have been plausible. Instead he chose to brazen it out in front of the Commission, arguing that everything he did was perfectly correct and legal, and any losses were the fault of somebody else.

We know everything he did was perfectly legal, because both the SEC and the FBI have dropped any plans to charge Cassano with criminal activity, which was one reason he was able to appear before the Commission and be so openly unrepentant for what happened. We also know that nothing he did was correct, which even a cursory reading of the public record will reveal. Cassano built an untenable portfolio of credit default swaps, selling these insurance contracts to banks around the world anxious to protect themselves if the US housing market tanked. He earned billions in fees for AIG and $300 million in bonuses for himself, but when the housing market did indeed tank, his losses totaled half a trillion dollars and destroyed AIG in the process. AIG was taken into the bosom of the US Treasury, and the American taxpayer made good all the losses the banks would have experienced had AIG been thrown into the bankruptcy courts.

Financial Reform Declared D.O.A.

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Financial Reform Legislation is D.O.A. according to Simon Johnson, an expert and watchdog on the Financial crisis. He is not alone in assessing the health of the patient.

At the end of the day, essentially nothing in the entire legislation will reduce the potential for massive system risk as we head into the next credit cycle.

That's right. What managed to get passed is now being stripped in conference, as we warned about and updated on here.

Now lobbyists are after the very weak version of the Volcker Rule:

To secure the support needed for their bill, Senate negotiators are leaning toward creating a series of exemptions to the Volcker Rule that would allow banks to continue to operate these businesses as investment funds that hold only client money, according to several Congressional aides, industry officials and lawyers.

Dodd's Dud

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You may be wondering why you haven't seen a post overview on the latest Senator Dodd's Financial Reform Bill, Restoring American Financial Stability Act of 2010 (link has legislative summary and text). That's because, as usual, it's a dud.

Firstly a few summary points are listed here. The Huffington Post has a list of other criticisms, including the political on Dodd 2.0. Also, yet another New York Times op-ed points to the well known fact, putting the CFPA under the Federal Reserve will de facto kill consumer financial protection.

SIGTARP January 2010 Report

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The January 2010 SIGTARP report is released and if anything it's a validation of this sites many observations to date on TARP.

Despite the fact that the explicit goal of the Capital Purchase Program (“CPP”) was to increase financing to U.S. businesses and consumers, lending continues to decrease, month after month, and the TARP program designed specifically to address small-business lending — announced in March 2009 — has still not been implemented by Treasury.

Notwithstanding the fact that preserving home ownership and promoting jobs were explicit purposes of the Emergency Economic Stabilization Act of 2008 (“EESA”), the statute that created TARP, nearly 16 months later, home foreclosures remain at record levels, the TARP foreclosure prevention program has only permanently modified a small fraction of eligible mortgages, and unemployment is the highest it has been in a generation.

SIGTARP notes that we are nowhere with financial reforms.

  • To the extent that huge, interconnected, “too big to fail” institutions contributed to the crisis, those institutions are now even larger, in part because of the substantial subsidies provided by TARP and other bailout programs.

New COP Report - Guarantees Created Significant Moral Hazard

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On Friday you were probably bowled over by the unemployment rate. So astounded, we missed this major report release by COP, the Congressional Oversight Panel on TARP.

The Report, Guarantees and Contingent Payments in TARP and Related Programs is another damning condemnation on corporate socialism to the point of moral hazard. Yet, at the same time, the report says taxpayers will likely profit from the huge TARP gamble. Well, well, if the government is turning the world into a glorified casino with U.S. taxpayer money, all the while guaranteeing the bonuses profits of large banks, at least it looks like we won't take the loss.

Hank Paulson & The Committee

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The House Oversight Committee held part III of their hearing Bank of America and Merrill Lynch: How Did a Private Deal Turn Into a Federal Bailout? This time the key witness was former U.S. Treasury Secretary Hank Paulson.

Frankly, Stonewall Hank just let Ben Bernanke off the hook, with claims of Fed Privilege and confusion to deny the Federal Reserve threatened BoA, as well as it's clear Hank Paulson threatened BoA CEO with losing his job if he didn't go through with the Merrill Lynch merger, but the issue is what isn't being answered.

More Big Bucks for Private Investors - Geithner "Plan" Leaked - TARP II

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Here we go, once again trying to get something for worthless assets at the U.S. taxpayers expense. This time since Obama and Geithner know there is no way Congress is going to give them more money....so, they are going to raid the FDIC.

The plan, which will not be released until next week is now leaked all over the press.

In order to get $1 trillion of the estimated $2 trillion of "toxic assets" off of the banks books, now the plan is to offer private investors huge subsidies and loans and then auction off these various assets to these same investors. These "toxic assets" are assuredly really toxic for the banks get to choose which ones they will sell.

The New York Times:

The plan is likely to offer generous subsidies, in the form of low-interest loans, to coax investors to form partnerships with the government to buy toxic assets from banks.

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